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New Markets Compensated for Loss of Russia for EU Beef Exports

15 March 2016

EU - In 2015, EU exports of live bovine animals showed an increase of close to 60 per cent year-on-year, mainly thanks to the re-opening of the Turkish market, according to the EU's latest Short Term Outlook for arable crops, dairy and meat markets.

Although live trade is focussed on countries around the Mediterranean, some live trade still exists with Russia. Lebanon and Turkey remained the two main destinations of live bovine animals.

Despite the difficult internal situation in Libya, the latter is EUs third destination, followed by Israel, which expanded its live imports from the EU in the second half of 2015.

The outbreak of bluetongue in France and Romania in September last year is the only negative point, having a direct effect on the movements of live animals to other EU regions but also to Turkey.

As the disease continues spreading in France at the beginning of 2016, a negative impact on live exports is expected.

Taking into consideration that the development of Turkish production capacity might compete with EU imports in the near future and lead in lower Turkish beef prices, live bovine exports are expected to decline by 10 per cent in 2016 and another 18 per cent in 2017, reaching 132 000 tonnes c.w.e. (still above 2013-2014 levels).

Beef meat exports increased slightly by 0.5 per cent in 2015 compared to 2014. EU beef exports to Russia represented around 35,500 tonnes in 2014.

The loss of this outlet due to the Russian import ban was fully compensated by increased exports to a multitude of other destinations like Norway, the Balkan countries, Egypt, Algeria, Gabon and Vietnam. A re-opening of the Russian market would probably have no major impact on EU exports.

Turkey accorded a new TRQ of 30 000 tonnes of bovine meat to the EU (till end of 2015), together with some tariff reductions. Mainly Poland took this opportunity to export beef meat to the Turkish market. An extension of this measure to 2016 was announced, but not yet confirmed by the Turkish authorities. For 2017, it is assumed that this TRQ is not extended.

Many bilateral initiatives to open up (new) agricultural markets are taking place at the moment, like Japan, which could even increase prospects for EU exports, currently estimated at 5 per cent for 2016.

In 2015, EU beef imports declined by close to 3 per cent as other markets outside the EU remained more attractive destinations. A minor shift of suppliers from Brazil and New Zealand to Argentina, Namibia and Botswana can be mentioned.

Decapitalisation of the Australian cow herd between 2013 and 2015, linked to drought, continued, and Australia increased its total beef exports even further compared to 2014 (data until October 2015) due to favourable trade conditions.

The recent free trade agreement (FTA) concluded between Australia and China may divert some trade away from the EU market, although probably only in the short-term.

Market signals are now clear that the US beef herd entered a stage of recapitalisation, inducing a shortage in supply in the short-term, but an increased production potential in the longer run, with first effects probably in the second half of 2016 or the beginning of 2017.

The current economic situation in Brazil (depreciation of Real and declining internal demand) should have given a boost to exports, but the contrary happened as total beef exports of Brazil decreased by roughly 10 per cent in 2015.

This might indicate a start of retaining animals and recapitalising of the reproductive herd due to the high internal and world prices faced by Brazilian farmers.

As the new Argentinean government has lifted the export restrictions for beef, more exports to the world market are expected, including to the EU, at competitive prices thanks to the devaluation of the Argentinean peso.

The possible extension of the list of regions authorised to export to the EU may favour even more exports. Overall, the EU imports are expected to increase only marginally by 1.5 per cent in 2016 and a further 4.5 per cent in 2017.

Despite the increase in production, EU prices for young bulls and adult male cattle stayed relatively firm in 2015 at a level 10 to 15 EUR/100 kg higher than 2014. The cow price (O3) showed a typical seasonal path similar to 2014. The continued slaughterings of heifers started to push the EU price slightly downwards since July.

World demand is expected to remain high driven by US and Asian consumers, but world prices might fluctuate because of supply uncertainty in Brazil, Argentina and Australia to the world market. Contrary to the trend of the last years (see box on retail sales), a recovery in EU consumption of close to 2 per cent was registered in 2015, reaching 10.7 kg/capita (in retail weight).

The expectation is that it will grow by another 1.6 per cent in 2016, in line with the higher availability of beef on the EU market.

Further Reading

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